TEHRAN, IRAN
— Iran's rejection of new US incentives to urge the Islamic republic to halt its nuclear ambitions could not have been on more prominent display.

Painted across a banner 20 feet wide and nearly 10 feet tall, hanging directly under the pulpit during Friday prayers at Tehran University - and shown live on national television - were the words of Iran's supreme leader, Ayatollah Ali Khamenei. "We will definitely not stop our nuclear activities," the banner proclaimed. "It is our red line."

The US offer - to drop objections to Iran's entry into the World Trade Organization and permit it to purchase spare aircraft parts if it freezes its nuclear program - marks the first significant policy change toward Iran since President Bush labeled it part of an "axis of evil" in January 2002. But Iran dismisses the offer as "insignificant" and says the price will be much higher to get it to give up nuclear

Instead, Mr. Mohebian says there is room for real dialogue, but at a higher level: "The US should send the message: 'We are not your enemy.' "

Washington says Iran's civilian program is a cover to build nuclear weapons, and has ratcheted up its rhetoric in recent months. Tehran denies the charge and says it does not want nuclear weapons, but is creating its own nuclear fuel cycle for atomic energy. Two years of inspections by the UN nuclear watchdog have found a string of violations in a program kept secret for 18 years, but no evidence that Iran has sought to make atomic bombs. Britain, France, and Germany have been in negotiations to get Iran to curb its nuclear ambitions. The US offer aims to join the Europeans in a united front; in exchange, the EU has agree to support taking Iran before the UN Security Council if talks fail.

Bush administration officials, after conducting regime change in Afghanistan and Iraq - military campaigns that have brought US troops to Iran's borders east and west - have repeatedly made clear that they oppose the clerical leadership in Iran.

The fact that the Bush administration would even consider European requests for incentives - much less opt for them - are "an enormous change" for this administration, says Ken Pollack, author of "The Persian Puzzle: The Conflict between Iran and America." Ironically, he says, the diplomatic route is also being favored by some US hawks. "The people who are arguing for military action [against Iran] are all in favor of taking it to the UN," says Mr. Pollack, a Mideast specialist at the Brookings Institution in Washington. "Their feeling is the UN will punt - the UN will never do anything - and that will provide the pretext for going to war."

Others see a similar result. "To me this seems like a transparent strategy: you offer Iran modest incentives that ... the US knows Iran will refuse," says Karim Sadjadpour, an Iran analyst for the Brussels-based International Crisis Group, speaking from Washington. "Then you can take [Iran] to the Security Council with a clear conscience, knowing that you did offer incentives, but Iran wasn't willing to accept.

"Whether or not it's exaggerated, there is a concern among mullahs that the US is not going to rest until it's removed the regime in Tehran," he says. "If that's their mindset, then [Iran] pursuing this deterrent is paramount."

Before giving up the crown jewels of a potential nuclear deterrent, experts say Iran expects some kind of guarantee that it will not be attacked.

"The question is: How much of that [Iran rejection] is negotiating in the bazaar, and how much of that is true?" asks Joseph Cirincione, head of the nonproliferation program at the Carnegie Endowment for International Peace in Washington, who returned last week from a nuclear conference in Tehran that included a visit to an Iranian conversion facility at Isfahan.

He says that, while there needs to be give and take on both sides, "That is exactly what many in the administration don't want to do - for some, the whole point is to overthrow the regime," he says. "So you really have a problem: The radicals in Tehran and Washington have the ability to torpedo any negotiations, by insisting on the right to enrich uranium on one hand, and insisting on the right to overthrow the government on the other."

While the ability to enrich uranium and actually having nuclear weapons aren't the same thing, some in Iran argue that they serve the same purpose.

"Atomic knowledge is modernity, progress; and we are living in an environment where that [enrichment] capability is a deterrent, a power," says Nasser Hadian-Jazy, a political scientist at Tehran University with close ties to the government. "For us it is much easier than to have a bomb."

He says Iran's supreme leader views the US offer as "humiliating." Iran expects, instead, sincere efforts to create a regional security bloc and perhaps a nuclear-free zone that destroys Israel's estimated 200 warheads. The London Sunday Times reported Sunday that Israeli commandos are training for a mission to destroy Iran's nuclear sites - and that the US would not stand in the way - if diplomacy fails.

"We joined the NPT to enjoy its fruits, and nuclear expertise is one of them," says Mr. Hadian-Jazy. "You can't just ask Iran to give up this right, and at the same time talk about regime change, sanctions, and military attack. It doesn't make sense."

There is "no chance" that Iran will dismantle its nuclear program, adds Hadian-Jazy, though there "can be a number of ways to produce a deal." Iran might accept real-time, joint international monitoring of its enrichment process, or agree not to manufacture certain nuclear material. Even limiting the range of missiles could be on the table.

Speaking in Venezuela on Saturday, Iran's president Mohamad Khatami said Iran was "willing to work with the world to give more security that Iran is not moving toward construction of nuclear weapons."

Echoing moderates in Iran, Hadian-Jazy argues that having nuclear weapons would increase Iran's vulnerability, by destabilizing the region with a new arms race. Any US military strike or severe sanctions would push many more Iranians into the "must-have the bomb" camp of the hard-liners, that Hadian-Jazy says is a small minority today.

And there may be other reasons for talks. Cirincione says he was struck by the "rather small" scale of the Isfahan facility, indicating to him that Iran has a "long way to go before they perfect these techniques, and assemble everything ... to enrich uranium for fuel, let alone for bombs."

The result may be that Iran is "more willing to give that up than their rhetoric suggests," says Cirincione. "Their sticking point may not be their commitment to enriching uranium, but the national pride that has been invested in this issue."